Greenberg: For-Profits — Blame It on The Short-Sellers

From the bizarre lawsuit file: I was wondering how long it would be before the for-profit college started suing short-sellers.

I didn’t expect this: A private for-profit suing a public community college in a suit that names several short-sellers as co-conspirators.

Chief among them: Steve Eisman of FrontPoint Partners, who has been vocal and very public in his criticism of the industry.

The suit was filed by The Keiser School, a private company, which operates Keiser University in Florida. Keiser is suing Florida State College in Jacksonville and several of its administrators.

Seems the two schools battle for similar students, and according to the allegations, Florida State waged a campaign designed to besmirch Keiser and the for-profit industry. According to the lawsuit, Florida State President Steven Wallace went so far as to email a hedge fund: “Here is a bunch of good stuff to get you started in your exploration of greed, corruption and predatory schemes among Florida’s proprietary and for profit career colleges.”

Where does Eisman come in? According to the lawsuit (and this is the short-hand version), his speech criticizing for-profits was promoted “in advance” by a Florida State official; Eisman then, according to the suit, sent copies of the suit to “undisclosed recipients including co-conspirators.” (Oh, my!)

His comments were then picked up by the media, the allegations continue; the negative media attention, in turn, according to the suit, led to “decrease in expected enrollment, increased costs of doing business and decreased business valuation” for Keiser.

Eisman told me today that until yesterday, when the suit was filed, he had never heard of Keiser. More prominent for-profit schools, none of which are mentioned in the suit, include Apollo Group (University of Phoenix), Education Management, ITT Education, Corinthian Colleges, Career Education and Bridgepoint Education.

My take: When public companies start suing the shorts, in what some might argue is a form of issuer retaliation, it often means the shorts are on to something. When private companies sue the shorts? I’m still shaking my head over that one.

P.S.: The lawsuit, which was mailed to media outlets, coincides with the White House’s Summit on Community College. A coincidence, no doubt.

_____________________________________________________Companies mentioned in this post